11 Popular Strategies for Investing $100K in Real Estate
August 25, 2022
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If you have 100k to invest, you need the top strategies for investing 100k in real estate. It's easier than you think, and you may be able to invest in more than you realize.
Here's everything you must know about achieving financial independence by investing in the real estate industry.
What Is Real Estate Investing?
Real estate investing means you invest in income-producing real estate or properties with the potential to fix and flip, earning you a profit. You can invest directly in an investment property or indirectly by investing in real estate companies that buy, manage, and sell real estate, sharing its profits with investors. You can invest in residential property, commercial real estate, or a combination of the two to meet your financial goals.
How to Start Investing in Real Estate
It may feel overwhelming to learn how to make money in real estate, but there are options for every real estate investor. The key is to educate yourself about the investments and understand your risk tolerance.
Research is the key to learning how to start real estate investing. Real estate investors have many options to create the perfect real estate investment strategy, so researching your options is essential.
Do you want to be actively involved in your real estate investments? If so, do you want to manage the property and tenants or fix and flip properties? Once you choose the direction you want, do your research to find the best property for investment. Don't assume any area is great for investing in, do your research to see which areas have the most significant potential.
If you want a passive income investment strategy, research your options, including real estate investment trusts, crowdfunding, and buying stocks of real estate companies.
The best ways to invest money in real estate are the ways you are most comfortable with and will provide the results desired. This requires research and planning with your financial advisors.
Evaluate Risk vs Reward
When you wonder where to invest 100k, you should always consider the risk vs. reward. Every investment strategy has risks, but how much risk you can tolerate matters. It takes risk to earn rewards, but you don't want to risk more than you can handle.
For example, many real estate investment opportunities, like rental properties, fix and flip properties, and commercial properties, are risky, but their reward is great. If you want to offset your risk with a more passive income stream, you can mix in real estate investment trusts or crowdfunding with your real estate property investments.
Why Getting Into Real Estate Investing With $100,000 Is a Good Idea
When looking for the best way to invest 100k, a real estate business should be one of your top options. Here's why.
Active and Passive Investing Opportunities
Real estate offers options for active and passive investors. Diversifying your portfolio is the best way to invest money. You lower the chance of a total loss when money is invested in different areas of the real estate market.
Easy to Purchase, Manage, and Sell
Buying, managing, and selling real estate is easier than you think. As you learn how to get started in real estate investing, you'll find opportunities to buy rental property you manage and earn rental income on undervalued properties you buy, fix up, and sell for a potential profit.
The key is to find ways to invest in real estate that align with your risk tolerance and financial goals.
Real estate is one of the few investments you can leverage. Say, for example, you have 100k to invest. You could put it in the stock market but only buy 100k worth of stock.
If you instead invest 100k in real estate, you can use the money as a down payment and buy a more expensive home. For example, you use the $100,000 to buy a $300,000 home, rent out the property and earn rental income. Then, when you sell the property, you earn capital gains, all with a smaller investment.
Investors today need ways to hedge against inflation; no investment strategy is a better inflation hedge than real estate. This is because when inflation soars, real estate values increase too, leaving real estate investors with more significant profits.
If you invested your money in stocks instead, you might have a lower return on your investment when inflation increases. This is because when it costs companies more money to operate, they have lower profits, which can mean lower stock values.
Options for All Types of Risk and Reward Levels
As you think about how to invest 100k, there are many ways to add real estate to your investment portfolio. There are opportunities for investors looking for high-risk and reward investments and those looking for lower risk and more stability.
When you run a real estate business, you get certain tax advantages. To do this, you must prove you own the real estate for investment and not personal use. If you meet these requirements, you may be able to lower your capital gains tax by deducting mortgage interest, real estate taxes, transportation expenses, and other typical business expenses. Working with reputable financial advisors is the best way to ensure you get all the tax benefits of getting into real estate investing.
Low Correlation Between the Stock Market and Real Estate
As you look for good investments for your 100k, you probably consider the stock market. While investing money in stocks can be a good option, putting all your eggs in one basket can be risky. Diversifying your portfolio with real estate assets can significantly reduce the risk of a total loss.
11 Popular Strategies for Investing $100K in Real Estate
Now that you know that residential real estate and commercial properties can be a great way to invest 100k, here are some popular investment strategies.
Flipping properties requires you to find undervalued properties with potential. This strategy requires the most research, but you may find it profitable once you get the hang of it. The best way to make it worthwhile is to work with a team of real estate experts. You need professionals who understand the market, can fix the property up for you, and help you sell it fast to make a profit.
Buying a Rental Property
Buying a rental property is a good option if you want longer-term ways to invest in real estate. However, this is an active investment since you must manage the property and the tenants. Therefore, you are 'on call' 24/7 unless you hire a property management company to manage the property.
However, you earn monthly rental income and the capital appreciation the property earns for the time you own it. When you sell the property, you keep the profits and pay capital gains taxes on the income.
Try a real estate investment trust if you want a more passive income opportunity. You invest in a real estate company that buys, manages, and sells commercial properties. This is a great way to get your feet wet with commercial properties without generating the capital required to invest in office buildings, apartment buildings, hotels, hospitals, and shopping malls.
REITs must pay out at least 90% of their profits. As long as you research and invest in the right real estate company, REITs can be a great way to learn how to get into real estate investing.
Purchasing Part of a Commercial Property
If your 100k won't allow you to afford the total cost of commercial real estate, but you like the potential, consider investing with a partner or group. Each investor owns a portion of the real estate and earns profits according to the percentage of your investment.
Do you have a knack for finding perfect properties but don't want to invest in them yourself? Then, you can use your talents to wholesale or work as the middleman in a real estate transaction. First, you find the properties and enter a purchase contract. Next, you flip the contract to your pool of real estate investors who pay a higher price than you offered to cover your 'finder's fee.' This can be the safest way to invest money in real estate when you're not ready to jump in headfirst.
Single Family Residences
To invest in real estate, you don't have to purchase apartments or condo developments. Single-family residences are a great option too. You can buy a property, make sure it's suitable for tenants and rent it out, earning rental income and capital appreciation as long as you own the property.
If you want to increase your earning potential or try 'house hacking,' you can buy a multi-family property. If you house hack, you use your 100k to buy a multi-family property and live in one unit. You get owner-occupied financing with more attractive terms than investment loans and still earn rental income from the other units in the building you rent to tenants.
You can also buy multi-family residences, renting out all units as an investment property. Remember that your financing will differ because you don't live in one unit. Investment property loans usually require a larger down payment and have higher interest rates.
Turnkey Rental Property
The best way to invest in real estate as a beginner is with turnkey real estate. If you find a property for sale that already has tenants, you buy the property and immediately become the new landlord. You don't have to fix the property, market it, or find tenants.
You can also buy turnkey rental property by purchasing a property that's ready for renters but doesn't have tenants currently. Then, the property is prepared for you to buy and immediately rent to tenants.
Crowdfunding is similar to investing with a partner or group. The only difference is you don't know the other investors. Instead, you invest on a crowdfunding platform, allocating a percentage of your 100k to each investment that you find suitable, whether debt or equity.
Rather than purchasing a single property, you can buy a group or portfolio of properties, leveraging your investment. This is a great way to diversify your investment and reduce the risk of a total loss by investing it all in one property.
Private Money Lending
If you'd rather be the 'lender' than investing in a property's equity, you can invest in private money lending. With this strategy, you lend money to real estate investors who need money to buy residential or commercial real estate. You earn cash flow from the interest charged on the loans.
Best Investment for 100K in Real Estate: FAQ
Is Real Estate an Asset?
When you invest in real estate, and it produces cash flow, it's an asset. Income-generating real estate is usually an asset as long as you do your research and find properties that perform well, leaving you with positive cash flow.
Is Real Estate a Good Investment?
Like any investment, real estate investing can be risky. However, it can be one of the best ways to invest your money or diversify your portfolio so you don't risk all your money in the stock market.
What Qualifications Do You Need to Become a Real Estate Investor?
You don't need any special qualifications to become a real estate investor. You also don't have to be an accredited investor. You just need the drive to succeed, the ability to do research, and a reputable investment advisor helping you understand how the investment will affect your portfolio, taxable income, and financial goals.
What Are the Lowest-Risk Real Estate Investments?
If you're trying to minimize your risk, mutual funds, stocks, and REITs are the lowest-risk real estate investments. You get the best of both worlds when you invest indirectly in real estate. You earn profits but don't have the large overhead or burden on your shoulders.
Can You Invest in Real Estate Through a Retirement Account?
You can use your retirement accounts to invest in real estate, but typically only with your self-directed IRAs. Since your investment options for a 401k are limited to the company's offerings, you can open a self-directed IRA and choose how you want to invest 100k in real estate.
How to Invest in Real Estate With 100K: The Bottom Line
The strategies for investing 100k in real estate are simple. Choose your strategy, invest your money and watch your money grow. Whether you invest in individual stocks, real property, or a combination of the two, getting started investing is the key to making money in real estate.
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